Long-term trend for entrepreneurship is down
Contrary to popular belief, the trend for entrepreneurship over the past 20 years or so is down.
That’ s according to an analysis I just read. Scott Shane, a professor of entrepreneurial studies at Case Western, studied several sets of data, all of which showed a downward trend in entrepreneurial activity. For example, using data from the Census Bureau measuring the number of new businesses formed annually from 1977 to 2005, he found that, on a per capita basis there are fewer companies being started. Also, an analysis of data from the 2009 OECD FactBook of the U.S. self-employment rate from 1990-2007 showed that the percentage of the labor force that’s self-employed is also headed south.
What’s the reason for these unexpected findings? Shane conjectures it’s thanks to the Wal-Mart effect–an increasingly difficult environment for small guys competing against big box competitors and other giants. But, that doesn’t really explain it, since this phenomenon would only hold true for retailers. Another possibility is that the high cost of health insurance is dissuading people from leaving a job that offers benefits or starting a company where they have to provide benefits to employees.
But, these conclusions run counter to most of the stuff we hear about these days regarding startups, especially in these times of growing unemployment, when a significant number of people are said to be turning to entrepreneurship because they can’t find a job. If the data is correct, then it’s disturbing. And it underscores the urgent need for health insurance reform.
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America has an entrepreneurial myth, one based on a long-ago reality. A century ago, most Americans lived in towns that had only recently been created, especially west of Pittsburgh. The dominant culture was one of rugged individualism, the real kind. You simply didn’t have old institutions, so you made them up as you went along. New schools, companies, streets, religions, Americans made them all up on the spot. Hence our culture of entrepreneurialism.
Today, we have a mature industrial infrastructure from coast to coast, 300 million people, expensive infrastructure, and significant concentration of wealth in a few hands. Add this to the new Soviet policy of keeping large companies running at the expensive of the Little Guy, and why on earth would you try to run a business? Not when there’s good money to be made in government contracts or suing people for sexual harassment or any number of non-creative ways to live off the system.
America is now Europe without the maternity leave and the lavish vacation time.
I agree with ericgarland. When I grew up the neighborhood was filled with little stores, delis, bakers, pizza joints, diners, butchers, shoe repair shops, toy stores and the only big competition came from the Department stores. When I hear Republicans talking about Ma and Pop operations I wonder what year their minds live in.
In 1980 I worked for a company that owned five or six theaters in LA and had my own in San Gabriel Valley. We survived because of the competition law, that is the anti-trust law that allowed small guys to compete with the big guys. So we could bid for films in our area and the best bid won. We did rather well until Reagan, he refused to enforce the law. We were all left out in the cold…we couldn’t get first run movies. We, the ma and pops went broke and the mega companies moved in.
Now every time you hear about a merger that would increase competition and serve the customer you wonder how? How is one gas station on the corner better than two? How does that increase competition and why are the gas companies freezing out local owners? In the last thirty years I have been self employed but that is rapidly becoming impossible. We have become a bizarre model of modern feudalism and most have clung to their homes as the only investment open to them, some invest at work in 401Ks, another scheme to get our money in the hands of Wall Street and now it has all come tumbling down.
I don’t know but when one looks around at the socialist countries they begin to seem like a good deal, at least they help the average citizen with free education and medical care.
I agree with much of what both of you have written. The prevalence of ever-larger companies in many industries makes it harder for small businesses. As more industry, power and money is concentrated in the hands of a smaller number of people, I, also, agree with your description of a bizarre modern feudalism.
But I don’t see that our policy is Soviet-style, if by that you mean it’s Communist. To the contrary, at least in terms of financial institutions, the government seems to be on the side of big financial interests, propping them up without challenging them in any fundamental way.
Also, by saying we’re now Europe, does that mean we’re a quasi socialist country? Because we’re a very far cry from that. Anyway, Europe without the maternity time and lavish vacation means we’re not Europe. They pay high taxes but get a huge amount in return–a safety net the likes of which we can barely imagine.
At the same time, I think that entrepreneurship is actually easier in this country than anywhere else.